#include <SoftwareSerial.h> //Include SoftwareSerial library

SoftwareSerial myBLUETOOTH(0,1);//define SoftwareSerial RX first  then TX

#define LED 2 // Define on board LED connected to pin 2
char state;  // Define a variable to save the reads char

void setup() {

  myBLUETOOTH.begin(9600); // Begin SoftwareSerial 
  pinMode(LED,OUTPUT); // sets LED pin as OUTPUT pin
}

void loop() {
if (myBLUETOOTH.available()){ // if SoftwareSerial recived any data 

    state = myBLUETOOTH.read();  //Reads the received char and store it at "state"
    
    if(state == 'Y') // If you recived Y 
      digitalWrite(LED, HIGH); //Turn LED on
      if(state == 'N'){       // If you recived n   
          digitalWrite(LED, LOW);//Turn LED off
      }
    
}
}